Visions for Sustainability

Author: John Thwaites MP is Deputy Premier, Minister for Environment and Minister for Water

Introduction

I am very pleased to be here tonight to open this important and timely series on 'Visions for Sustainability'.

Unless governments, businesses and communities share the vision ­ and act on it ­ the sustainability agenda will be full of earnest discussion, best endeavours but little change.

Sustainability is about meeting the needs of the present without compromising the ability of future generations to meet their needs.

To steal the aphorism from the 1970s movie love story, ŒSustainability means never having to say you¹re sorry¹.

That is ­ having to say to our children and grandchildren ­ 'sorry we stuffed up your environment and your quality of life' because of what we did, or didn't do.

Just as former generations may well have been sorry if they saw the terrible salinity damage caused by massive land clearing and inappropriate water use.

Recently I was at a function of Japanese businessmen and women trading with Victoria. They made the comment of how surprised colleagues in Japan were at Australia's refusal to sign the Kyoto target protocol because in Japan, Australia had a 'clean and green' reputation.

At the moment ­ Australia is trading on its international good will.

But our 'clean and green' credits will run out, as countries wake up to the fact that Australia is:

... the highest emitter of greenhouse gases per capita in the developed world ­ but refuses to sign Kyoto;

that Australia is:

... producing more waste than any country outside the USA;

and that Australians are:

... the second highest users of water in the world (despite living on the driest inhabited continent).

These are issues on which other countries will increasingly judge us.

More importantly, they are the things that will determine whether or not our children and grandchildren have a sustainable future.

The one thing we can¹t afford in Australia is business as usual. Instead, we need to start taking a business approach to sustainability.

By that I mean ­ making the true costs to our environment fully transparent on our nation¹s bottom line. We need to stop just looking at economic outcomes and start working towards the best balance of environmental, social and economic outcomes

The sustainability agenda is broader than the traditional environmental agenda which has tended to focus on icon issues.

Saving the Franklin or stopping logging in particular forests.

Important though these issues are, the achievement of sustainability will require a fundamental shift in the way we live and do business.

If we are going to change business we have to use the tools of business ­ principally the market.

This doesn¹t mean a laissez-faire approach. Rather, it means making the market work for the environment.

All markets have a regulatory base ­ whether it is contract law or ASX rules. To achieve sustainability, government needs to provide the right regulatory base for the market that takes into account the real environmental costs of different activities.

In this global world, one of the most powerful tools at our disposal­ is 'the market'.

We need to get inside the heads of industry leaders­ and to make a strong business case for environmental efficiency.

Let me give an example of how we can do this. I was very pleased last week to see one of Australia¹s largest regulated superannuation funds, VicSuper, become the first company to sign our Government's Sustainability Covenant with the Environment Protection Authority.

This means that VicSuper has signed up to reduce its own greenhouse gas emissions and waste. More importantly, it will invest a set proportion of its $1.6 billion assets on companies that rate as sustainability leaders. VicSuper has asked its property investment manager to have a sustainability strategy in managing its properties.

We¹re also seeing leadership in Victoria in the new housing sector, where a major builder -­ is promoting its five-star efficient housing as a major selling point.

So how, as a State Government, are we using market principles to champion the environment?

Water

Let's start with water ­- our nation¹s biggest domestic challenge.

Victoria has developed significant benefits from having firm water entitlements.

The ability to trade these entitlements has led to high-value investment, with Victoria achieving twice the dollar value of agricultural production per litre of water used compared to NSW.

As a result of our more secure market system, Victorian irrigated agriculture is investing in horticulture and wine grapes rather than rice and cotton. This is more sustainable and uses less water.

But we can do more. In this session of Parliament, we are debating four pieces of legislation that will significantly change the way we use and value water, to drive efficiencies on farms, in industry and homes.

Pricing of water is central to securing a sustainable water supply. Through transparent pricing, ­ water will flow to the highest value forms of production, and encourage smart use of our scarcest resource.

In Victoria, we are establishing the Essential Services Commission, as the independent economic regulator of all water businesses in Victoria. This will mean that for the first time, the cost of environmental management will be transparent in the pricing of water.

Water has been undervalued in the past and sold at prices not reflecting its true cost and scarcity. Melbourne householders pay more for one litre of milk than they do for a thousand litres of water. The debate today is not on whether the price of water should go up, but by how much, and how to manage the transition.

While pricing mechanisms are important for driving changes in behaviour, we are also stimulating the market with substantial government funding to generate further investment in sustainable water projects. We have $27 billion of water infrastructures in the State, much of it in need of upgrading to be more efficient.

To modernise this infrastructure, we have a targeted program to draw public and private investment in major water projects that will be sustainable and attract other innovations from market players, including on-farm producers and infrastructure investors.

The centrepiece of our water program is the $320 million Victorian Water Trust ­ to support innovative water efficiency projects, and new technology for sustainable water use.

Professor Peter Cullen has been appointed to chair the Victorian Water Trust Advisory Council, to advise us on how to spend the $320 million and leverage Commonwealth and private sector investment in major water projects.

We are already supporting projects of national importance, such as the Wimmera-Mallee pipeline, with $77 million towards a $300 million project to improve river health and generate new economic opportunities by stopping the evaporation from open channels.

Half of the funding for this project will flow from the private sector, including the farmers in the region who depend on a reliable water source.

The vast majority of the water saved ­- some 85,000 megalitres a year -­ will be returned to the environment in improved environmental flows in the rivers in Western Victoria. This investment would not have occurred without the State playing a leadership role to leverage wider investment.

Similarly with our vision for the Werribee Plains, to recycle 70,000 megalitres of water a year for agriculture, tourism and environmental improvements to the wetlands and rivers ­ and create over 1000 jobs in the water and agribusiness sectors.

We have a number of water trading initiatives underway in rural Victoria that are moving tens of thousands of megalitres of water per year from low value to high value uses.

We are pushing for national water market reforms to encourage further smart investment in our water resources. And we are leading the development of national water efficiency labelling ­ similar to the five-star energy scheme ­ to strengthen the market in water-smart products.

And for consumers, we are offering up to $500 in rebates for water-efficient products, to again stimulate the market to achieve good environmental outcomes.

We have set some tough targets to drive water reform, including:

... Increasing the efficiency of irrigation systems by 25% by replacing channel systems with pipelines and other improvements;

... Reducing Melbourne¹s drinking water use per capita by 15% by 2010; and

... Recycling 20% of Melbourne's 'waste' water by 2010.

Of course, the market does not have all the solutions to all our problems. For example, take salinity.

Soil salinity and river salinity is a crisis across the country. It destroys biodiversity and costs Australia millions every year in lost agricultural production, and is now affecting some urban towns, destabilising roads and the built environment.

Salinity is due to years and years of misuse of the land and water through land clearing and inappropriate water use ­ and correcting the balance will take major changes to our behaviour.

Transparent pricing of water will go some of the way to making these changes, but it will also require leadership by governments at all levels.

In Victoria, the Government has a number of effective training and incentive programs working with farmers to achieve sustainable land use and redirecting producers away from salinity affected areas.

Landcare groups are making a practical difference. And we are working closely with the Federal Government on a $1.4 billion National Action Plan for Salinity and Water Quality. This money is supporting communities to understand the causes of salinity in their regions and develop strategies to address it.

So our water agenda involves both market stimulus, and partnerships with the community and government to improve our understanding and change the way we use our natural resources.

Energy

Whilst water is our immediate challenge, unless we address climate change ­ drought and fire and other extreme weather events will be increasingly common.

International re-insurance companies are already taking this into account when setting premiums, as 87% of economic losses in Australia have been caused by weather-related events. Again ­- the reality of market forces is driving changes in business practices.

When you consider that Victoria¹s production and use of energy is responsible for about 40% of Australia¹s total greenhouse emissions ­ you can see why improving the efficiency of our energy supply is critical. That¹s why we strongly support Australia signing Kyoto. Australian business needs to be part of the international market mechanisms that will drive innovative solutions to the problem of greenhouse and climate change.

We are doing everything we can to convince the Commonwealth and industry that it is in our interests to sign up. We jointly commissioned with NSW and SA an independent report on the business case for signing Kyoto. But we're not holding our breath waiting for a sign of leadership from the Howard Government.

We began last year to put in place a series of actions to reduce growth in greenhouse gas emissions in Victoria by up to 8.3 million tonnes by 2012 ­ the equivalent of removing three-quarters of cars from our roads. And we have a target to increase our use of renewable energy in Victoria from 4% to 10% by 2010.

From solar hot water rebates to retrofitting our schools and public housing ­ there are a number of key initiatives to lift our energy performance, including $13 million in this month¹s State Budget.

But we can't do it alone. Again, we will need to use some form of market mechanism to drive cost-effective energy efficiency measures.

We will be consulting widely with business and other stakeholders to develop our greenhouse abatement policy.

It is likely that Australia will need to introduce some market-based instrument, such as a carbon-price penalty or emissions trading­ to drive down greenhouse emissions.

The range of policy options to be considered will need to include alterations to energy pricing to encourage conservation and a cap on total emissions from a source ­ such as the NSW retailer benchmark system.

It's estimated that 80% of the growth in demand for energy in Australia is coming from industry and manufacturing. As the home of manufacturing, this is where Victoria can ­ and will ­ take a leadership role in working with industry to reduce greenhouse.

Waste

The other key area where market mechanisms is playing a positive role for the environment, is in waste management. Victoria produces about 8.3 million tonnes of waste a year with about half of that amount ending up in landfill.

The Victorian Government last year introduced a levy to increase the cost of landfill in Victoria. This is sending a market signal that is driving improvements in business, as they face up to the true costs of waste.

Through the Government¹s recycling body, EcoRecycle we are developing a Solid Waste Management Strategy to reduce the quantity of waste generated by 15% by 2013. We also aim to increase the recovery rate in all solid waste generated in Victoria from 48% to 75%. It's estimated that we can save up to $900 million by 2013 simply by taking a more assertive approach to waste management.

Conclusion

Clearly, there are significant challenges to make Victoria a sustainable state. If we take a business as usual approach ­ we won¹t get there.

Businesses tend to be a lot like individuals. There's only a small percentage of us who invest in a five-star washing machine and a water tank without the appropriate incentive.

As policy makers ­ we have to get the environment factored in to the bottom line by ensuring a properly regulated market.

As environmentalists, we can't afford to see the 'market' as a dirty word.

Progressive business leaders can help change the mindset that what¹s good for business must be bad for the environment.

And as progressive governments, we must begin to practice what we preach in terms of the triple bottom line.

We must make our state and our country a world leader in sustainability so we won¹t have to apologise to our children for the mess we leave.